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18 Year property cycle - using it as a Timing tool

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Harrison's 18 Year property cycle - using it as a Timing tool

 

Tools here: Videos, Data, Chart links

 

18yrcyc.jpg

 

ed-real.gif

 

 

Fred Harrison's Cycle, Videos describing it

===================

 

Intro. to 18 year Cycle :

 

Part.1/ Low 1994-2005 :

 

Part.2/ 2005 & beyond :

 

(Please watch the Videos before commenting here, or at least the third one- less than 10 minutes)

(Also: written comments on YouTube are very helpful, & mention Talk-View.com, to bring traffic here.)

 

I bought Harrison's book (Boom Bust, House Prices, Banking, and the Depression of 2010), have read it carefully, and prepared three short videos explaining how property price movements since 1994 can be fit into Harrison's cyclical framework.

 

Now I want to take it to the next level, and combine the 18 year cycle, with various other technical trading tools to try to "nail" the turning points. Can this be done with confidence and precision. Follow the progress of this thread and you will find out.

 

(BTW, once the Talk-View site is launched, I plan to move the thread over to the new website.)

 

I welcome any help that other posters may give in developing this thread.

First task:

Locate the Halifax (NSA) Data for the chart at the top of this posting.

 

TARGET: Pds. 160,000, 20% down by --?? (year-end 2008 perhaps/ And then what?)

 

Calling the Bottom?: TOOLS, see Post #41

 

CALCULATIONS:

(US)======= : -2000 : The Peak 2006/7 (+chg.) : 2009-12 (-chg) : Most recent

Property Index : 100.0 : Q2'06 : 189.93 (+ 89.9%) : 114.0e (-40.0%)

Hs'hld income :

Resid.R.Estate

Mortgage Debt

 

(UK)======= : -2000 : The Peak 2006/7 (+chg.) : 2009-12 (-chg) : Most recent

Property Index : 77.70 : Q3'07- 184.13 (+137.0%) : 100.0e (-46.0%) : 1/09, 150,501 -16.6% in 12mos (N'wide)

Hs'hld income :

Resid.R.Estate

Mortgage Debt

 

= = = = =

LINKS:

Property Podcast : http://commoditywatc...low-will-it-go/

Halifax/NSA Data : http://www.hbosplc.c...spreadsheet.asp

Nationwide Data : http://www.nationwid..._since_1952.xls

Roller Coaster UK: VIDEO

Curley, Jan. 2008: http://www.haver.com...ent/080108X.htm

By Oct. 2008 ??? : http://diaryofaprope...ill-it-get.html

Kuma's summary, 18 yr.Cycle: http://www.housepric...p;#entry1078462

+ + + + +

Clone, HPC : http://www.housepric...showtopic=83490

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OTHER CHARTS and data

 

080108F.JPG..080108G.JPG..

 

January 8, 2008 / see: Louise Curley

 

· The seasonally adjusted Halifax Bank of Scotland's Index of house prices showed a slight rise in the price of houses in the United Kingdom in December after declines in the three previous months. The Index rose 1.3% from 629.5 (1983=100) November to 637.7 in December. The Bank also publishes data on the pound price of a house. In December the price rose to 197,039 pounds from 194.500 in November. The average price of all houses in the U.K. in index and pound terms is shown in the first chart

 

Hometrack: Buying price as a % of asking price

080728a.JPG

July 10, 2008

Halifax House Price Index June

On an annual basis, house prices in June were 6.1% lower. UK average prices have returned to the level they were at in August 2006. The UK average price remains slightly higher (2%) than two years' ago, more than 10% higher than in June 2005 and almost 40% above that in June 2003.

=====

 

Data: Standard Average Price (Pounds) Seasonally Adj.

Cal. 2004: 165,310

Cal. 2005: 179,233

Cal. 2006: 195,973

 

aatv3latestsf4.jpg

 

Mon Year Index YoY Price-NSA

=== === ==== === =====

Jan 2005 517.7 12.6 159,956

Feb 2005 517.0 9.6 159,750

Mar 2005 523.7 8.0 161,809

Apr 2005 528.9 5.8 163,428

May 2005 531.6 3.2 164,242

Jun 2005 535.6 2.2 165,501

Jul 2005 536.5 1.4 165,775

Aug 2005 542.8 3.8 167,699

Sep 2005 548.5 3.7 169,465

Oct 2005 547.0 4.2 169,010

Nov 2005 549.8 5.7 169,891

Dec 2005 548.4 5.5 169,438

Jan 2006 539.7 4.2 166,744

Feb 2006 551.6 6.7 170,440

Mar 2006 562.4 7.4 173,778

Apr 2006 581.3 9.9 179,609

May 2006 584.8 10.0 180,680

Jun 2006 579.6 8.2 179,082

Jul 2006 580.9 8.3 179,470

Aug 2006 586.2 8.0 181,122

Sep 2006 593.6 8.2 183,402

Oct 2006 600.3 9.7 185,466

Nov 2006 609.0 10.8 188,172

Dec 2006 594.4 8.4 183,645

Jan 2007 595.7 10.4 184,067

Feb 2007 612.3 11.0 189,197

Mar 2007 625.2 11.2 193,180

Apr 2007 641.5 10.4 198,206

May 2007 644.9 10.3 199,264

Jun 2007 645.5 11.4 199,458

Jul 2007 649.2 11.8 200,578

Aug 2007 650.8 11.0 201,081 : 100 % / The Peak

Sep 2007 647.8 9.1 200,168 : - 00.45% down from the peak

Oct 2007 640.2 6.7 197,817 : - 01.62%

Nov 2007 628.7 3.2 194,258

Dec 2007 632.2 6.4 195,333

Jan 2008 619.1 3.9 191,275

Feb 2008 626.1 2.2 193,448

Mar 2008 616.9 -1.3 190,619

Apr 2008 618.0 -3.7 190,952

May 2008 603.5 -6.4 186,482 : - 07.26%

Jun 2008 588.3 -8.9 181,765 : - 09.61% / (Aug.'06 level)

Jul 2008 577.5 -11.0 178,440 : - 11.26% / (Apr.'06 level)

========

See Updated Databank : xx

 

Halifax/NSA Data : http://www.hbosplc.com/economy/historicaldataspreadsheet.asp

= = =

Seasonally-adj.:

July : £177,351 : August last year, prices peaked at £199,600 : Both seasonally adjusted (post#39)

Aug.: £

 

 

Economic Data - Halifax UK House Price Index - AllMon(NSA)

Year : Jan. , Feb. , Mar. , Apr. , May. , Jun. , July. , Aug. , Sep. , Oct. , Nov. , Dec

2008 619.1 626.1 616.9 618.0 603.5 588.3 - - - - - -

2007 595.7 612.3 625.2 641.5 644.9 645.5 649.2 650.8 647.8 640.2 628.7 632.2

 

/see: http://www.moneyfacts.co.uk/economicdata/h...priceindex.aspx

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Excellent work - would be great to see some of the other charts used in more detail as well if that's possible.

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Excellent work - would be great to see some of the other charts used in more detail as well if that's possible.

 

Thanks. That detail is coming.

And I do hope that many old and new posters will be willing to post charts and comments on thsi thread.

(and its successor thread on T-V.) My initial thought on the detail I want to use are these:

 

+ A fall to Pds.160,000 is an easy target. At Pds.5,000 per month, we could get there by year-end.

+ Once that is broken, I could see a futher drop to Pds.140,000 or Pds.124,000 (a 38.8% retracement.)

+ The last move up in 2005 could have stopped at Pds.170,000 - if the BofE had raised rates;

+ Instead, they cut rates by 25bp, and that helped to trigger a big rally to Pds.201,000, nearly 20% more

 

I want to look for tools which would have helped to forecast that last surge up, the "Winners Curse".

Of course, Harrison forecast "Three more years" from 2005, so he must have had ome strong confidence.

But what other indicators would have helped to justify that forecast??

 

Here's a Key indicator: Mortgage Approvals

mtgapprvvv0.jpg

 

...which seems to have formed a nice V-bottom before the Aug.2005 & Jan.2006 Lows in the index

 

Aug 2005 542.8 3.8 167,699 (prior low)

Sep 2005 548.5 3.7 169,465

Oct 2005 547.0 4.2 169,010

Nov 2005 549.8 5.7 169,891

Dec 2005 548.4 5.5 169,438

Jan 2006 539.7 4.2 166,744 (low)

Feb 2006 551.6 6.7 170,440

Mar 2006 562.4 7.4 173,778

Apr 2006 581.3 9.9 179,609

 

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Hello.

 

I notice you've thought of a Fib retracement (38%). Have you tried a Fib projection maybe to arrive at the peak? 61.8%; 100%; 161.8% from the previous peak? Which I guess would be from the '89 peak. Just a thought.

 

Joe.

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Hello.

 

I notice you've thought of a Fib retracement (38%). Have you tried a Fib projection maybe to arrive at the peak? 61.8%; 100%; 161.8% from the previous peak? Which I guess would be from the '89 peak. Just a thought.

 

Joe.

 

Yes. That culd be a useful forecatsing technique

With a peak very near Pds.200,000 a 50% retracement of the whole thing would br Pds.100,000.

Gann would take that as key support, I suppose

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Just watched the vids - I'm impressed with your

clear and concise summary of Harrison's world view.

Good job, ABB

 

Thanks for the comment, ABB.

I would be most grateful, if some could type comments on the YouTube videos:

Text Comments section - that would help to build interest there.

Also helpful, would be something like:

"I look forward to discussing future property price moves on GEI and Talk-View dotcom."

 

My ultimate aim is to provide a Forum for intelligent discussion of price moves by those

who understand cycles, and technical analysis. I think we can help each other to find

the Low, and avoid buying too soon.

 

(BTW, I have just arranged to "point" the Talk-View domain name to this thread.) !!

 

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+ A fall to Pds.160,000 is an easy target. At Pds.5,000 per month, we could get there by year-end.

 

Seems to be what IG Index think too - they're giving a spread of £157,100-£160,700 for the end of the year.

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aatv3lowtimingst5.jpg

 

Now, with the Halifax data in hand, I am able to make a better comparison

 

hpicomparewc7.jpg

 

The collapse off the peak is FAR faster this time.

 

+ From the July 1989 peak, I saw a -2.42% slide by Dec.1990. (Pds.70,588 to 68,708)

+ The final "real price" low was Pds.60,638 in Jan.1996, down -14.10% from the peak

+ The initial low was Pds.60,196 in Feb.1993, down -14.72% from the peak

+ Less than a year from the Aug.2007 peak, the index is already down -9.61% (June'08)

+ The latest month (June) showed a Pds.4,717 fall (that's -2.53% in a single month !)

 

+ Targets hit by----- Oct.2010 : Oct.2011 : Oct.2012 / starting from - 9.61% down

: 0.5% monthly falls : - 21.5% : -26.0 % : - 30.3 %

: 1.0% monthly falls : - 31.8% : -39.5 % : - 46.4 %

: 1.5% monthly falls : - 40.8% : -50.6 % : - 58.8 %

: 2.0% monthly falls : - 48.7% : -59.3 % : - 68.4 %

 

(Note: this is Halifax, non-seasonally adjusted data)

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My ultimate aim is to provide a Forum for intelligent discussion of price moves by those

who understand cycles, and technical analysis. I think we can help each other to find

the Low, and avoid buying too soon.

(BTW, I have just arranged to "point" the Talk-View domain name to this thread.) !!

 

 

I was planning at some point to add a "Buy" traffic light with the monthly "Homeowner Wealth Index" released after Nationwide numbers.

 

"When will the Property Bear Turn Bull?"

 

I am not looking at the bottom though. I'm looking for near the bottom at the start of the next up-swing.

 

I think there will be ample time to decide before jumping in on the first sign of slowing falls - or even occasional positive months. I don't believe there will be a sharp bounce, but a period of stagnation/rehabilitation.

 

I was thinking along the lines of basing it on simple moving averages of about 6 months.

 

Edit: By the way re your earlier post - it was October 2008.

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I was planning at some point to add a "Buy" traffic light

....I think there will be ample time to decide before jumping in on the first sign of slowing falls - or even occasional positive months. I don't believe there will be a sharp bounce, but a period of stagnation/rehabilitation.

...- it was October 2008.

 

It is way too soon to talk about a bottom.

The very earliest that I could image is probably October 2010. But I reckon it will be 2011-12.

And even then, you may be offered a good 2-3 trade, not an ideal long term buying opportunity.

That's my idea now, anyway.

 

I could see the market down by 14-16% from the Top by Oct. 2008

 

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CATFLAP's TIMING QUESTIONS : (posted on the making the video thread)

 

= 1/

What caused the mini-boom in UK house prices from 1977-1979?

 

 

This is something that has always bugged me as it comes just a few years after the early 70's boom/bust where house prices should have stayed low for a few more years, a bit like the period we had between 1994 and 1997. Just like today, it was in an era of rising commodity prices/stagflation but of much higher (reported) inflation and happened from Q2 1977 to Q4 1979.

 

Interest rates were 15% in October 1976 but got reduced 21 times to a low of just 5% in October 1977 and yet inflation was 16.5% in 1976 and 15.8% in 1977. Was it the cutting of interest rates by so much in just one year, the year after we got bailed out by the IMF what lead to this mini-boom in house prices?. It lasted just two and a half years and ended in another recession slightly early on the mid-cycle point.

 

To me it appears that cutting rates down to 5% to stimulate the economy did indeed spark a mini housing boom, but what is really apparent is just how low they were in real terms - inflation was 15.8% for that year so real rates were actually negative by a long way. Looking back we had negative interest rates from the early 70's up until around early 1981 which is near to where commodity based inflation tailed off before it peaked in 1982.

 

I don't think we've seen seen negative rates like this since, but if the BoE is forced to abandon the 2% inflation target and cuts the base rate in the future then we could see this effect once again and possibly another mini boom in house prices in a few years time - but I hope we don't.

 

Any thoughts on this - is it valid?

 

 

 

=====

= 2/

Will the bottom in house prices really be around 2012/2013? - it could be the there is mini boom instead

 

In a 5-year period from late 1974 to late 1979 house prices in the UK increased by a staggering 115% - today we are roughly at the same point as we were back then in late 1974. One year has passed since the peak in house prices ('73 & '07) and we are 8 years into a commodity bull run (starting in '66 & 00) only this time we have inflation which is under-reported through new ways of measuring it (hedonics).

 

You can see the mini boom/bust before and after 1980 on the HPC graph but it's not where you would expect to see a housing boom on the 18-year economic cycle. Presently, the general HPC consensus is that house prices will trough 5 to 6 years after their 2007 peak just like they did in the very last crash, but I'm starting to think that this might not happen. Why? - because of commodities, inflation and the strong possibility that interest rates get cut right down to save the economy leading to negative interest rates which will support and then boost the housing market in a few years time.

 

Instead we might find that in 4/5 years time there is a small boom period again in house prices bought on by negative interest rates which is what seems to have happened from early 1977 to late 1979. The other difficulty in predicting the bottom is comparing like with like - is it better to compare this crash occurring in a commodity boom to a previous crash which occurred in a commodity boom (the 1970's) rather than comparing it to the last crash which occurred when commodities were falling?

 

As I've shown, after the 1973 peak in house prices there was a two and a half year mini boom from Q2 1977 to Q4 1979 which is what you see on the graph - it was in a stagflation time of rising commodity prices just like today. There's nothing to say that there won't be a similar two to three year mini boom this time round starting in say 2011 and peaking in maybe 2013, precisely the point where current HPC theory says it will be the bottom

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Thanks for that interesting background.

 

= 1/

What caused the mini-boom in UK house prices from 1977-1979?

 

This is something that has always bugged me as it comes just a few years after the early 70's boom/bust where house prices should have stayed low for a few more years, a bit like the period we had between 1994 and 1997. Just like today, it was in an era of rising commodity prices/stagflation but of much higher (reported) inflation and happened from Q2 1977 to Q4 1979.

 

Harrison's system pegs that Cycle as follows:

Prior Peak...... : 1972

The Low, starts: 1976 (actually: 1975-77 would be a 3-5 year correction)

Recovery .......: 1976-1983 / so this picks up your "mini-boom in 1977-79"

Mini-Recession : 1983?

Take-off......... : 1983-1988

Winners Curse : 1988-1990

The peak ?? ... : 1990 (actual peak was July 1989, per Halifax)

 

aatv11989peak2rk0.jpg

 

Interest rates were 15% in October 1976 but got reduced 21 times to a low of just 5% in October 1977 and yet inflation was 16.5% in 1976 and 15.8% in 1977. Was it the cutting of interest rates by so much in just one year, the year after we got bailed out by the IMF what lead to this mini-boom in house prices?. It lasted just two and a half years and ended in another recession slightly early on the mid-cycle point.

 

To me it appears that cutting rates down to 5% to stimulate the economy did indeed spark a mini housing boom, but what is really apparent is just how low they were in real terms - inflation was 15.8% for that year so real rates were actually negative by a long way. Looking back we had negative interest rates from the early 70's up until around early 1981 which is near to where commodity based inflation tailed off before it peaked in 1982.

 

Right. So that 1982 commodity peak would set the stage for:

Mini-Recession : 1983?

Take-off......... : 1983-1988

 

I don't think we've seen seen negative rates like this since, but if the BoE is forced to abandon the 2% inflation target and cuts the base rate in the future then we could see this effect once again and possibly another mini boom in house prices in a few years time - but I hope we don't.

Any thoughts on this - is it valid?

 

We need to approach this question with the idea:

"Anything can happen- but the cyclical narrative suggests the most likely"

At least until it is obvious that the cyclical narrative is out of joint.

So if the UK swings into an inflationary period, and incomes are rising fast, that may help to

raise rents, and by doing that, speed up the arrival of the day where Buying is cheaper than renting.

For now, I wouldnt bet on that yet, I would simply watch to see what develops.

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= 2/

Will the bottom in house prices really be around 2012/2013? - it could be the there is mini boom instead

 

In a 5-year period from late 1974 to late 1979 house prices in the UK increased by a staggering 115% - today we are roughly at the same point as we were back then in late 1974. One year has passed since the peak in house prices ('73 & '07) and we are 8 years into a commodity bull run (starting in '66 & 00) only this time we have inflation which is under-reported through new ways of measuring it (hedonics).

 

I am not so sure we are "at the same stage as 1974".

The Uk has experienced massive appreciation in the 14 years to August 2007, and that upsurge (and the

excesses that came with it), have not yet been corrected. I do believe that prices will need to fall to the usual

bottoming-metric (ie. buying is cheaper than renting / yields exceed mortgage rates) before the next upsurge

begins.

 

You can see the mini boom/bust before and after 1980 on the HPC graph but it's not where you would expect to see a housing boom on the 18-year economic cycle. Presently, the general HPC consensus is that house prices will trough 5 to 6 years after their 2007 peak just like they did in the very last crash, but I'm starting to think that this might not happen. Why? - because of commodities, inflation and the strong possibility that interest rates get cut right down to save the economy leading to negative interest rates which will support and then boost the housing market in a few years time.

 

As I implied in the post above, I dont think that negative interest rates will sufficient to re-ignite the property uptrend. Why not? Yields are too low, and buyers are earning less on their properties than mortgage rates to finance the property purchases. "Fools" buy during the Winners Curse period on such metrics, because banks were happy to provide aggresssive loans, and buyers were willing to bet on continuing capital gains. But I think the recent price falls have revealed the inherent risk of this strategy. It will be years before investors and banks go back to such a risky practice.

 

What COULD re-ignite an upswing would be rapidly rising rents, which could push yields higher, and provide a cashflow argument for buying (so long as rental yields exceed interest rates.) But that would mean that interest rate markets remain sleepy, and ignore the risk of rising inflation. The UK government might get away with that trick for a year or two, but once inflationary expectations have adjusted upwards, so woudl interest rates IMHO.

 

... Is it better to compare this crash occurring in a commodity boom to a previous crash which occurred in a commodity boom (the 1970's) rather than comparing it to the last crash which occurred when commodities were falling?

 

As I've shown, after the 1973 peak in house prices there was a two and a half year mini boom from Q2 1977 to Q4 1979 which is what you see on the graph - it was in a stagflation time of rising commodity prices just like today. There's nothing to say that there won't be a similar two to three year mini boom this time round starting in say 2011 and peaking in maybe 2013, precisely the point where current HPC theory says it will be the bottom

 

Like I said, the government might get away with a negative interest rate trick for a year or two- although I doubt it will happen. But eventually the markets would wake up. So if you see, a 2010-11 bottom, and a inflation-driven boom starting, you'd better sell into it.

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I have now filled in the missing figures, for the House Price Crash table

 

The collapse off the peak is FAR faster this time.

+ Less than a year from the Aug.2007 peak, the index is already down -9.61% (June'08)

+ The latest month (June) showed a Pds.4,717 fall (that's -2.53% in a single month !)

 

+ Targets hit by----- ..Oct.2010 : Oct.2011 : Oct.2012 / starting from - 9.61% down

: 0.5% monthly falls :.. - 21.5% : -26.0 % : - 30.3 %

: 1.0% monthly falls: - 31.8% : -39.5% : - 46.4%

: 1.5% monthly falls :.. - 40.8% : -50.6 % : - 58.8 %

: 2.0% monthly falls :.. - 48.7% : -59.3 % : - 68.4 %

 

(Note: this is Halifax, non-seasonally adjusted data)

 

The market is currently falling at over 2% per month.

Look at the MASSIVE FALL (40%) we can get by Oct.2011, if the market slide

simply averages just 1% per month. A 2%+ drop per month is huge !

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In an parallel attempt to decipher the cyclical influences I have put the Nationwide Quarterly data

on a Logarithmic scale, so it is easier to see dips in a long term context.

 

hpilogju1.jpg

Raw Data source: http://www.nationwide.co.uk/HPI/downloads/..._since_1952.xls

 

Over this period (1952 to 2008) Prices rose from Pds.1,891 to a Pds.184,131 peak in Q3.2007.

The latest price for Nationwide "All Houses (UK)" was Pds.174,514 for Q2.2008

 

Low Points:

L#1: Qx.1957 (- n/a -): 3.268 : Pds. 1,853

L#2: Q4.1968 (+56 q): 3.650 : Pds. 4,089

L#3: Q4.1981 (+52 q): 4.377 : Pds 31,557

L#4: Q4.1995 (+56 q): 4.707 : Pds 50,930

L#5: Q4.2008 (+52 q): 5.10E: Pds.126,000 (a fall of 31.6% from 184,131 high in Q3.2007)

L#6: Qx.2022 (+56 q):

 

Interestingly, this provides a different cycle (of 13-14 years between lows) and different future low points than Harrison's work.

The projected Low of Pds.126,000 in Q4.2008 is only a guess based on trendlines. The timing assumes 13 years (52 quarters) from the prior low of Q4.1995.

 

The important long term trendline is near Pds.170,000 in Q3.2008. That is less than a 10% fall from the Quarterly high, and has been broken already, I believe, if we used July prices.

 

It is possible that we may see an "early" low in 2010-11, a brief "inflationary bounce" as Catflap has described and then the 7-year mini-recession may come along with the 13-14 year cycle low that I have described here.

 

We will have to watch carefully what measures the government takes to prop up a rapidly deflating property bubble.

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July - Still well over 1% "crash cruise speed"

===============

 

House price falls continue in July

• The price of a typical house fell by 1.7% in July

• The price of a typical house is now £15,000 lower than this time last year

• Housing purchase activity reaches a new low

• Weakening economic conditions raise the likelihood of earlier interest rate cuts

 

Headlines............................ July 2008 June 2008

Monthly index * Q1 '93 = 100 : 336.3 .:. 342.0

Monthly change*.................. : -1.7% : -0.8%

Annual change .................... : -8.1% : -6.3%

Average price..................... £169,316 £172,415

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Hello Dr.Bubb,

 

My first post here - was lurking here and on HPC for a long time. Saw your videos and wanted to say well done and hi!

I have also read Fred's BoomBust Edition 2 book and found it fascinating.

 

One of the areas I would like to discuss with you is the application of the 18 year rule (to greatly over-simplify his whole book!) to other countries. Fred mentions that the rule holds true no matter if a land starved island(UK) or massive expansive (Oz).

 

As I am invested in property in Dubai, I am intersted in hearing your views on wether this rule will apply in Dubai.

Of particular note is that in the Year 2002 - Foreign ownership allowed in limited freezone areas.

 

Using Fred's generalised 18 year rule, I have come up with the following:

 

2002 Boom

2003 Boom

2004 Boom

2005 Boom

2006 Boom

2007 Boom

2008 Boom / mini-recession

2009 Boom / mini-recession

2010 Boom

2011 Boom

2012 Boom

2013 Boom / Winner's Curse

2014 Boom / Winner's Curse

2015 Boom / Peaking

2016 Bust

2017 Bust

2018 Bust

2019 Bust

 

Of course the global gredit crunch could disrupt the cycle, but I expect Dubai to folow these rules.

 

What do you think? In 2014 I would probably get out off Dubai and back into the UK.

 

Regards,

 

FWIW

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One of the areas I would like to discuss with you is the application of the 18 year rule (to greatly over-simplify his whole book!) to other countries. Fred mentions that the rule holds true no matter if a land starved island(UK) or massive expansive (Oz).

 

As I am invested in property in Dubai, I am intersted in hearing your views on wether this rule will apply in Dubai.

Of particular note is that in the Year 2002 - Foreign ownership allowed in limited freezone areas.

 

It is possible that the cycle may unfold that way in Dubai.

But I think we will soon be due for the Mini-Recession, so I have edited your text above for years 2008-2015:,

adding the words after the "/":

 

2008 Boom / mini-recession

2009 Boom / mini-recession

...

2013 Boom / Winner's Curse

2014 Boom / Winner's Curse

2015 Boom / Peaking

 

However, to be more confident about this, I think it would be a good idea to look at several decades of price history- if you can find it. To see how well the 18 year time frame has worked in the past.

 

Do you have a chart of Dubai prices? (If not, use oil prices maybe, where I see a 30 year cycle)

 

Also, please listen to the last part of my Part-2 about Harrison's cycle. And remember that the 18 years is only a guideline, and the actualk periods can get disrupted by Wars, and big developments like Peak Oil.

 

 

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It is possible that the cycle may unfold that way in Dubai.

But I think we will soon be due for the Mini-Recession, so I have edited your text above for years 2008-2015:,

adding the words after the "/":

 

2008 Boom / mini-recession

2009 Boom / mini-recession

...

2013 Boom / Winner's Curse

2014 Boom / Winner's Curse

2015 Boom / Peaking

 

However, to be more confident about this, I think it would be a good idea to look at several decades of price history- if you can find it. To see how well the 18 year time frame has worked in the past.

 

Do you have a chart of Dubai prices? (If not, use oil prices maybe, where I see a 30 year cycle)

 

Also, please listen to the last part of my Part-2 about Harrison's cycle. And remember that the 18 years is only a guideline, and the actualk periods can get disrupted by Wars, and big developments like Peak Oil.

 

Yes, that's the problem - Dubai has only recently opened up to foreigners. Therefore, I don't think there are sufficient property records in place. For example, the Dubai Land Registry and the Real Estate Regulation Authority (RERA) were only setup last year. From my own experiences I can generalise that property prices trippled from 2003 to 2007. 2008 is still rising as far as I understand it.

 

There are some nice tools to be found here for recent sales transactions:

 

http://www.alineah.com/market_analysis.asp

 

Will be an interesting experiment to see if Dubai fits into the Fred's general theory.

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From the Wealth Index thread

 

Did Spline post an update/explanation on HPC? I should have paid more attention to his graph in the old days (when I was welcome on HPC).

 

khpi_jun2008.png

From the linked article above.

Wonderful chart on the correlation between mortgage approvals and prices.

WE may get that 30%+ drop sooner than may expect

 

Note: (-4.17% annualised is -40%).

It’s interesting that the blue line is annualised monthly data and not YoY price rise

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Halifax vs. Nationwide, as reported on the HPC clone thread:

 

differences.gif

 

You can clearly see the Halifax is displaying a delay of a huge amount, compared to Nationwide.

 

Hmm. Thats a huge and rather puzzling difference, which requires a closer look

 

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from the HPC clone:

I wrote a summary of Fred Harrison's Boom Bust book about 3 months ago, it took me bloody ages to write so I'll be shamlesly linking to it everytime the book gets mentioned.

btw, n1 DrBubb, thanks for posting the video's they were an enlightening watch

Very useful, Kuma.

I will post a link in the header here & on GEI, as follows:

Kuma's summary, 18 yr.Cycle: http://www.housepricecrash.co.uk/forum/ind...p;#entry1078462

 

(from that thread):

"In contrary to the other posters here I thought the book was appallingly written.

Cheers

Kuma

PS: Points that the book makes that I wasn’t able to fit into the above:

I. Debunking of the affect of planning regulation on house/land prices (basically bugger all)

II. Historically house prices are the equivalent to 18 years of rental income saved at 5% interest rates

III. Monetary policy that targets interest rates is counter productive as it punishes good businesses as well as bad

IV. Previous attempts to introduce such a land rent in the 30s was blocked by the House of Lords and various land owning lobbies

V. The high land prices lead to smaller plots for building"

 

I agree that the book is flawed.

The argument is not fully formed, and the overall organisation is poor.

For instance, I dont think he properly explains where the 18 year time frame comes from.

(Personally, I thibk it has something to do with the timeframe of memories, and the length of

banker's careers- ie those who got burned last time have moved on.)

 

I would have liked to see more price data and charts, and had him walk use through historical

cycles, just as I have done in the part 1 and part 2 videos. Personally, I find it hard to trace the

cycle before the 1970's, and when I did my own work on detecting historic cycles in about 2004,

I came up with a length of 15-16 years, and a possible peak in 2004/5.

 

Later, I found this data on US real estate cycles, going back to 1870- just after the US Civil War

CHART : Advfn thread

re18yrcycle0ej.gif

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From an Investors Chronicile article:

coverfeatcrashhistory31zd3.jpg

coverfeatcrashhistory31zd3.9a7630ed47.jp

 

Unlike in the 1980s, the recent bubble was a truly nationwide phenomenon. House prices went through the roof not just in London and the south-east, but right across the country. During the last bubble, the party was confined to the more prosperous areas, with London achieving double the increase seen in the north between 1983 and 1989. The pain today is likely to be much more widely shared.

 

Blueprints of a demolition job

 

• This is the fifth crash since 1945.

 

• House prices fall an average of 28 per cent in real terms during crashes.

 

• The three biggest crashes have lasted on average 66 months.

 

• At the end of crashes, the average house price/income ratio is 2.8 times, compared with a recent level of more than 5.

 

• The biggest quarterly drop in house prices was between March and June 1975 when the market fell 5.5 per cent in real terms.

 

• The biggest real monthly drop actually occurred during a boom: -4.2 per cent in December 2002.

 

• A bottom could occur in early 2013

 

House-price boom and bust is as familiar a feature of the British landscape as thatched cottages and pebble-dashed semis. There have been four bubbles since the second world war, each followed by a crash. This gives us a gorily graphic guidebook of what we might expect from the latest installment of housing horrors.

 

In the four post-war crashes, house prices fell on average by 27.7 per cent in real terms (see chart, below). If we exclude the mini-crash of 1979-82 – which followed hotly on the heels of the 1973-77 meltdown – then the average sell-off has been 31 per cent. The three most serious episodes have all been pretty similar in duration, averaging 66 months – or just under six years. The most severe was the last collapse in the early 1990s, although this record could easily be broken.

 

coverfeatdearhouses3107pz1.jpg

 

Whether you adjust for inflation or not, the Halifax index has fallen even further this time than at the equivalent point in that last crash. But just how far might house prices fall and over how long a period?

 

In inflation-adjusted terms, UK house price crashes have tended to last for about five years. If history repeats itself, the market might hit rock bottom in late 2012 or early 2013. The overvaluation of the market also points to big falls. According to Halifax, the average house cost 5.43 times average wages in April. Over the long term, the average has been about 3.97, around a third of where it is now. However, prices tend to overshoot in a crash – by 1995, the ratio had fallen to just 3.09 times.

 

Let's imagine that house prices continue to fall at their recent monthly rate. At the same time, let's say that average wages continue to grow at the pace they have for the past 10 years. Under this scenario, the Halifax house price/wages ratio would return to its long-run average in January 2011, with house prices having fallen some 17 per cent from current levels, or 25 per cent from peak to trough.

 

A 25 per cent drop in nominal house prices would easily qualify as the biggest crash yet in UK house prices. During the last housing bust, the Halifax index fell by 'only' 15 per cent. However, it's quite possible that the crash will be even worse still. Both the Halifax index and my longer-term UK housing series suggest that the price-to-wages ratio tends to fall below historic average levels during a slump.

 

How long could it last?

 

At the bottom of the last slump, the average UK house was priced at 3.09 times the median annual wage. If prices keep falling at the rapid rate they have lately, it would still take until April 2013 for the the price/wages ratio to return to 3.09 times. However, this still optimistically assumes that wages will keep growing at their 10-year average rate, when lately they’ve actually been slowing sharply.

 

The worst could well be to come for another reason. In the last three crashes, the steepest falls in prices tended to occur when the economy was in recession. This is most likely because recessions involve some people losing their jobs and a lot more people worrying that they'll be next out of the door. As yet, the UK hasn't officially entered a period of negative growth and unemployment is relatively low. If things get worse – as seems likely – the housing crash will accelerate.

 

There will be lots of false dawns along the way. Property cheerleaders will seize on any slight upturn in the data and tell us that the "worst is over". However, it's worth remembering that, during the last slump, the Halifax index actually went up in nominal terms about 40 per cent of the time. Even during 1991 – when the country was mired in recession and home repossessions hit an all-time high – there were two months when prices rose by around 1 per cent, month on month.

 

 

CRASHES since 1945 =========

- - - - - - - - - - - - - Real price falls

Post-war.............. - 72 months -24.3 %

Early-mid 1970s... - 45 months -32.1 %

Late 70s-early 80s - 30 months -17.0 %

Late 80s-mid 90s.. - 80 months -37.4 %

2007-current.......... - 9 months -11.0 %

Source: Nationwide, Investors Chronicle

 

/see: http://www.investorschronicle.co.uk/Invest...n-shares-up.jsp

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